New Dutch tax law for the assessment of possible employment relations previous message

New Dutch tax law for the assessment of possible employment relations

If you hire an independent contractor, you always have the risk that this relationship is qualified as an employment relationship. Generally, this requires the  principal party to levy Dutch wage tax.  If this wage tax has not yet been levied from the start, the additional wage tax and penalties can be around 108% of the original contractual value. In order to manage this risk, the contractor could request the Dutch tax authorities for a Declaration of Independence. This simple and straightforward system will be abolished as per May 1, 2016.

In the new framework, companies can only reduce their risk if:

  • They submit the contract of their working relationships with the independent contractor to the Dutch tax authorities for approval; or
  • Make use of standardized contracts that will be published by the Dutch tax authorities on the internet; or
  • Structure their contracts differently (for instance using a pay rolling agency)

Risk indicators

Not each relationship with a contractor is risky. A one day assignment for an electrician is not very likely to be requalified into an employment relationship. There are however some risk indicators that (combined) may increase the risk for the principal party:

  • The contractor has a limited number of assignments and clients
  • The contractor works very frequently for the principal
  • The contractor is not allowed to provide a substitute
  • The contractor has no professional liability insurance
  • The principal provides (working) instructions to the contactor
  • The contractor is not required to invest in equipment, working material
  • The contract is also paid during absence and/or holiday

Recommendation

We recommend companies to review their working relationship with contractors. If one of the risk indicators applies, it need to be assessed if further action is required. If you have any comments or questions, please contact Guido van Asperen (guido.van.asperen@fisconti.nl or +31615041623)

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